At the urging of the Obama administration, General Motors announced an increase in the speed and magnitude of cost cutting measures Monday. A Wall Street Journal article also explained, “The U.S. Treasury will extend an additional $11.6 billion to GM, in addition to $15.4 billion in existing loans. The government will forgive half the debt in exchange for equity in a restructured GM.” Later, the article quotes a statement by President Obama’s automotive task force: “We will continue to work with GM’s management as it refines and finalizes this plan and with all of GM’s stakeholders to help GM restructure consistent with the President’s commitment to a strong, vibrant American auto industry.”
I’ll give you a minute to let that soak in.
Maybe I’ve been disillusioned for years and this sort of thing is commonplace, but reading it now makes me spit up a little bit. The government owning equity in large corporations? Large corporations making decisions based on the President’s priorities? It doesn’t compute in my free-market brain. Giving a failed (not failing) company money to “save jobs” is terribly short sighted.
And it’s not just any money; it’s taxpayers’ money. Seeing the clear lack of reasonable economic justification for investing in GM, the government decided to force the issue. It’s ridiculous and irrational. If the people had to choose an automaker to nationalize, I’m sure they’d go for one of the most successful. What a concept.
It all brings to mind Atlas Shrugged – something in which I’m not alone. Says another WSJ writer: “When profits and wealth and creativity are denigrated in society, they start to disappear — leaving everyone the poorer.”
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